China is making a major power play to expand its global energy influence. The United States has long played an outsized role in global geopolitics and energy markets thanks to the shale revolution which jettisoned the country to the top of the fossil fuel food chain. But if you’ve been keeping up with any headlines out of the Permian Basin over the last few years, you know that the shale revolution is dead. As oil prices remain disastrously low, the U.S. is losing its foothold in global oil and energy markets, and when the dust clears and the geopolitical maps are redrawn, China could very likely come out on top. Under President Xi Jinping, Beijing has made considerable inroads into power markets around the world.
This is in no small part thanks to the country’s assertive Belt and Road Initiative, which was announced back in 2013. President Xi’s global infrastructure development program entails hefty Chinese-led investment in as many as 70 countries and international organizations around the world.
China’s move into global energy markets is diverse and widespread, from nuclear to coal to renewable energies. Beijing’s geopolitical efforts have been particularly pronounced in Africa, a largely untapped market for energy infrastructure development and demand growth that Beijing is quite keen to dominate. In fact, China has been battling it out with Russia in recent months to establish dominance in the continent’s nascent nuclear sector.
While China is working to develop itself as a nuclear power in Africa, a renewable energy power for its own energy security (not to mention the added benefit of some nice climate-friendly PR), and a coal power overseas (thereby endangering global climate goals while keepings its own emissions numbers relatively low), Beijing is also aggressively trying to move into oil and gas markets. This initiative, too, is focused on Africa.
This week, Modern Diplomacy reported that “China’s national oil companies are investing heavily in the exploration and production of oil and gas supplies in Africa,” remarking that the continent is the “second largest region in supplying oil and gas to China, after the Middle East, with over 25% of its total imported oil and gas.” China’s appetite for oil is nearly insatiable, and the nation has quickly risen through the ranks to become the largest importer of black gold in the world for two years in a row.
According to the Modern Diplomacy report, China has a whopping USD$15 billion worth of investments planned in Africa’s oil sector. This massive price tag is split between three major players out of China: China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (SINOPEC) and China National Offshore Oil (CNOOC).
Africa, which suffers from a staggering US$50 billion per annum investment gap in its energy sector, is in many ways a wide open playing field for energy- and power-hungry Beijing. Ostensibly, it is for this reason that Beijing is pouring considerably more cash into the African continent’s energy sector than into its other energy investment projects in the Americas.
GlobalData’s Coa Chai was quoted by the report as characterizing China’s current African investments as follows: “About two thirds of spending is in Nigeria, Angola, Uganda and Mozambique. SINOPEC and CNOOC are well-established in Nigeria and Angola, while CNPC has a stake in the Rovuma LNG project in Mozambique”. Overall, China has significantly ramped up its presence in nearly 20 African countries.
As China exponentially increases its presence in global energy markets, some pundits believe that the United States (never one to go quietly) could be headed into an “energy export battle with China.” The United States will likely fight hard to retain its dangerously dwindling market sector for shale exports while China invests massive amounts of cash into its own energy infrastructure domestically and abroad. While China’s appetite for energy is guaranteed to keep growing, it’s clear that President Xi will do all he can to make sure that China weans itself off of dependency on imports from countries like the United States.
By Haley Zaremba for Oilprice.com